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Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation, or FDIC, is an independent agency of the federal government that insures deposits at commercial banks and savings and loan institutions.

Expanded Definition

By insuring deposits in banks and thrifts, the FDIC promotes confidence in the banking industry, limits bank runs during market panics, and limits the effects on the economy when a bank or thrift fails.

Savings, checking, and other deposit accounts are currently insured up to $250,000 per person per bank or thrift. (The limit was temporarily raised in 2008 from $100,000 as part of the government's response to the credit crisis; $250,000 is guaranteed as the limit through December 31, 2009.) It provides separate coverage for retirement accounts, including IRAs. The FDIC does not insure securities, mutual funds, or other like investments.

The FDIC is funded through premiums charged to insured banks and thrifts. As of December 31, 2007, the FDIC had $53 billion available to insure approximately $3 trillion in deposits.

The FDIC was established in 1933 in response to the widespread bank failures of the 1920s and 1930s. Prior to the establishment of the FDIC, consumer panic, whether warranted or unwarranted, could result in a run on the bank, which would often contribute to its destabilization and collapse. Customers who had not withdrawn their money would lose everything.

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